BPLP Credit Assurance Corp. Assigned Prelim. 'A-' Rtg.Business Editors TORONTO--(BUSINESS WIRE)--Standard & Poor's Feb. 11, 2003-- Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. today assigned a preliminary 'A-' issuer credit rating to BPLP Credit Assurance Corp. (CAC See Consumer Advisory Council. ), and placed the rating on CreditWatch with negative implications. The preliminary ratings are based on information and documentation as of Feb. 10, 2003. Subsequent information or changes to the documentation may result in the assignment of a final rating that differs from the preliminary rating. CAC is a special-purpose corporation, formed for the sole purpose of providing credit support for the obligations of Bruce Power Bruce Power Limited Partnership is a Canadian corporation. It exists as a partnership between Cameco Corporation (31.6%), TransCanada Corporation (31.6%), BPC Generation Infrastructure Trust (31.6%), the Power Workers Union (4%) and The Society of Energy Professionals (1. L.P. (Bruce Power) under various power purchase and ISDA ISDA See: International Swap Dealers Association agreements (collectively, PPAs). The rating on CAC reflects the direct support of the company's obligations from its three ultimate parents, Cameco Corp. (A-/Stable/A-2); TransCanada PipeLines The TransCanada pipeline is a system of natural gas pipelines, up to 48 inches (1219 millimetres) in diameter, that carries gas through Alberta, Saskatchewan, Manitoba, Ontario and Quebec. It is maintained by TransCanada PipeLines, LP. It is the longest pipeline in Canada. Ltd. (TCPL; A-/Watch Neg/--); and the Ontario Municipal Employees Retirement System (OMERS OMERS Ontario Municipal Employees Retirement System ; AAA/Stable/--), collectively known as the guarantors, via a series of guarantee agreements. TCPL, OMERS, and Cameco, through wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , entered into an agreement in December 2002 to acquire a 79.8% stake in Bruce Power from British Energy British Energy plc (LSE: BGY) is the UK's largest electricity generator by volume and a constituent company of FTSE 100. It is primarily an operator of formerly state-owned nuclear power stations. , with the sale expected to close in mid-February 2003. British Energy had provided credit support for Bruce Power's obligations under the PPAs by issuing guarantees to the PPA PPA 1. Palpation, Percussion & Ausculation 2. Pittsburgh pneumonia agent 3. Postpartum amenorrhea 4. Price per accession 5. Pure pulmonary atresia counterparties. Upon close of the sale, CAC will assume British Energy's obligations under the PPA guarantees. CAC has only nominal capital, making its ability to support its obligations under the PPA guarantees solely dependent on the expected support of the guarantors pursuant to the guarantee agreements (the parental guarantees). Each of the guarantors has committed, under the parental guarantees, to fund its pro rata [Latin, Proportionately.] A phrase that describes a division made according to a certain rate, percentage, or share. In a Bankruptcy case, when the debtor is insolvent, creditors generally agree to accept a pro rata share of what is owed to them. share of CAC's obligations under the PPA guarantees. The obligations of the guarantors are several (that is -- not joint), with the pro rata support to be provided as follows: TCPL 39.6%, OMERS 39.6%, and Cameco 20.8%. Based on the ratings on the three guarantors and the strength of the parental guarantees, the rating on CAC has been assessed at the lowest of the issuer ratings on its three parents, currently A-/Watch Neg./--. Although the rating on CAC is capped by the rating on its weakest parental guarantor guarantor n. a person or entity that agrees to be responsible for another's debt or performance under a contract, if the other fails to pay or perform. (See: guarantee) GUARANTOR, contracts. He who makes a guaranty. 2. , it is not necessarily equalized to that rating. It is important to note that a change in the rating on any of the three guarantors (not just the lowest rated) could affect the rating on CAC, and that the rating could fall below that on the weakest guarantor. The rating on CAC is based on the overall likelihood of a default by CAC on its obligations. Because CAC relies on each of the three guarantors to fund its share of CAC's obligations, the likelihood of default by CAC is equal to the sum of the default probability of its guarantors, which is therefore the primary determinant determinant, a polynomial expression that is inherent in the entries of a square matrix. The size n of the square matrix, as determined from the number of entries in any row or column, is called the order of the determinant. of the rating. Although most of the PPA guarantees reference a maximum fixed dollar amount (totaling about C$250 million), one of the existing PPA guarantees does not have a ceiling, and therefore CAC's exposure under this guarantee is theoretically unlimited. The liability of CAC under this PPA guarantee is equal to the mark-to-market exposure of Bruce Power to the PPA counterparty. This exposure is tied directly to wholesale electricity prices in Ontario. A significant increase in electricity pricing would increase CAC's exposure under this guarantee, leading to increased exposure of CAC's guarantors for their pro rata support of CAC's obligations, and in turn potentially affecting the ratings on the guarantors and on CAC. Standard & Poor's has reviewed the impact of various pricing scenarios (including stressed cases) on the exposure under this PPA guarantee, and based on this review, believes that it is unlikely that increases in electricity pricing in Ontario would be significant enough to affect the rating on CAC. Notwithstanding, unforeseen changes to the electricity market could affect the rating on CAC. The rating on CAC is based on its obligations under existing PPAs only, and if CAC agrees to provide guarantees for any new PPAs entered into by Bruce Power, the rating on CAC could be affected. The effect would be determined at that time, and Standard & Poor's would revise the rating if appropriate. RATINGS PLACED ON CREDITWATCH WITH NEGATIVE IMPLICATIONS BPLP Credit Assurance Corp. Preliminary issuer credit rating A-/Watch Neg/-- Copyright 2003, Standard & Poor's Ratings Services |
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